Hollywood torn in runaway war

Tax bills face steep climb

Although tax credits could help, Hollywood’s war against Canada and other countries wooing away film and TV production is not likely to be won in the halls of Congress or in state capitol committee rooms.

While production in Canada remains minuscule compared with that of Hollywood, the United States’ northern neighbor has been accused of unfairly using its position as a free-trade partner to draw American productions with a lure of hefty tax incentives that many American legislators seem reluctant to match.

On Sept. 1, the California Senate Appropriations Committee is set to renew a troubled debate on a measure that would provide a 10% tax credit on labor (excluding the highest-paid talent) to TV and film productions that shoot in the state.

However, the measure is by no means assured of passage, since there are legislators in Sacramento who cannot conceive of anyone in Hollywood being hard-pressed for money.

A similar idea — bearing a tax credit twice the size of California’s — is being floated in Congress, but it faces an even steeper climb. Acknowledging that it lacked more than rudimentary support, proponents of the so-called United States Film Protection Amendment pulled the proposal from the House Ways & Means Committee shortly after introducing it on July 14. They hope to give the bill a renewed push this fall.

But even with U.S. incentives in place, Canada would still be a major draw for producers looking to save a buck. The reasons are simple:

  • a strong U.S. dollar that makes Canadian products and services cheaper than those produced in the U.S.;

  • considerably lower wages;

  • less restrictive labor laws;

  • easier terms for bank loans, and

  • direct government subsidies for some productions.

To Thom Mount, president of the Producers Guild of America, “the exchange rate is the killer. You could move toward parity with some of these other political issues over a period of time, but, after having gotten there, you can’t do much about a 20% discount on the dollar.”

However, Mount sees hope in the improving Canadian economy, which, he said, “will erase the 20% savings over, say, two or three years.”

Stemming the tide

“I hope it’s not too little, too late,” said Will Huston, an actor and producer who appeared in “Tales From the Hood” and who just directed a short spoof called “The Blair Fish Project.”

“I don’t want to move to Canada,” Huston said. “Canadian winters are no picnic.”

Some workers in Hollywood — especially below the line — have seized on the notion of tax credits as the savior of an industry that, in the last 10 years, has lost about 125,000 full-time production jobs and has seen droves of productions lensing on foreign shores.

“The tax credits incentives made all the difference,” said the Academy Award-nominated documentarian Mark Mori, who shot the Learning Channel’s “Survivors” series in Saskatchewan. “Frankly, I wish they’d pass some of those tax credits here, because it might keep some of the work here. In Canada, I can get more for my money.”

Three times in recent months — in Burbank, Sacramento and Hollywood — industry workers have taken to the streets in rallies, waving placards and shouting their conviction that Hollywood is losing its core business through runaway production and that government needs to do something about it fast, preferably in the form of tax credits.

Always a trade-off

Gary Goodman, a partner in the Santa Monica-based company Goodman/Rosen Prods., said most producers would prefer to stay in Los Angeles.

“When you go to a distant location, there’s a always a trade-off,” said Goodman, whose company shot “Highlander” and the “Police Academy” series in Vancouver, and the pilot for Columbia/TriStar’s “Secret Agent Man” in Montreal, as well as several TV movies elsewhere in Canada.

“They have great crews up there, but, with so much work, how deep is that pool of talent behind and in front of the camera?” Goodman asked. “I have friends who have become landed immigrants up there — writers, directors and editors — specifically to get more work. It’s a shame they have to do that.”

Jack De Govia, chairman of the Film & Television Action Committee — a coalition of industry workers, vendors and business people — is one of the fiercest advocates of tax breaks, but concedes they won’t solve the problem by themselves, although he insists such a bill would bring at least some producers back to Hollywood.

“They’re looking for any edge at all,” De Govia said. “Producers don’t want to go to Canada. They’re being forced to go because of the economics of the situation.”

‘Retreat’ mentality

Yet Michael Everett, an L.A. labor activist, believes that to march in favor of the proposed California legislation “is a retreat and not an advance.”

“The state rebates, even if passed, will be so small as to have virtually no effect on runaway production and will only transfer tax money from the taxpayers to the very corporations who are responsible for exporting our jobs,” Everett wrote in an e-mail message to associates in the industry.

In any event, the legislation is doomed, Everett concludes. “The taxpayers will never allow the level of corporate welfare that would be required to offset the rebates of Canada and other countries.”

Weak attempt

Producer Doug Claybourne, whose credits include “The Mask of Zorro,” “Rumble Fish” and “The War of the Roses,” said the proposed tax legislation is “not even a pebble in the pond.”

“It’s not going to turn the tide, but it’ll make a difference for the smaller-budget movies,” Claybourne said.

For a TV movie budgeted at between $2.5 million and $3 million, shooting in Canada means a savings of about $200,000, he said.

Claybourne recently priced a motion picture two ways: As a U.S. shoot, he said, the budget was $44 million; in Canada, it was $39 million.

“The actual saving was 26% in the production period, below the line,” he said. “You have to match what the Canadians do.”

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